Swiss Life extends PEH credit facility

Private Equity Holding (PEH), the ailing listed private equity investment management firm based in Switzerland, has resolved its short-term liquidity crisis following Swiss Life’s decision to defer repayment of a SFr325m (E220m) credit facility.

In a statement, PEH said the extended facility, originally due to expire on March 10, would provide the company “with the necessary time to find a solution for its financing needs which is in the interest of the company and its shareholders.”

A SFr350m credit facility was fully drawn by the end of 2002. The credit facility was governed by several covenants, one of which required a three-fold over-coverage of the loan with selected assets held by Private Equity Holding. In early January, Private Equity Holding repaid SFr25m to Swiss Life in order to remain in compliance with the covenants.  At the same time the private equity group committed itself to presenting an acceptable proposal to Swiss Life on the early repayment of the outstanding balance of the loan.

Alternative options for PEH include a refinancing of the Swiss Life credit facility,

a securitisation of a portion of its investments or the sale of portfolio participations. However, the company said the latter was not favoured as any sale would be at a significant discount to current value.

In its most recent report for the year ended 31 March 2002, the firm reported a SFr264.9m (E181m) net loss, the result of significant write-downs in its portfolio. The largest write down was for SFr118m, taken on an investment in US Ventures, a US tech investor to which PEH made its largest single commitment in March 2000.

In the three months to 31 December 2002, the fair value per share of Private Equity Holding progressively declined from SFr213.52 to SFr154.60. During the same period, the firm announced permanent write-downs of SFr38m. On February 28, the fair value of the firm’s portfolio stood at SFr148.12 against a share price CHF 14.50 representing a discount 90 per cent.

The firm has attributed its current plight to “difficult market conditions, lower valuations of portfolio investments, disproportionate commitments made in the past and a low level of distributions.” 

Swiss Life Private Equity Partners took over management of Private Equity Holding, which listed on Swiss Stock Exchange in 1999 in July 2001, overhauling the firm’s operations. The firm says that it has also completed a re-assessment of the portfolio, which currently comprises 84 fund investments and 37 direct investments.